Dr. Phillip Pizzo School of Medicine Dean 2001-2012

The Dean's Newsletter:
May 29, 2001

Table of Contents

 Executive Committee Update: Report by PA Pizzo
 Clinical Research Task Force
 Noteworthy Events
 Student Financial Aid
 The Vera Moulton Wall Center
 High-Tech High-Touch
 Junior Faculty Gathering
 Asian Liver Center
 Professor Michael Levitt
 Professor Roeland Nusse
 Appointments and Promotions

Executive Committee: An Overview of the Financial Landscape and Challenge Facing Stanford University School of Medicine.

At the Executive Committee Meeting on Friday May 19th, I reviewed with Department Chairs and other faculty leaders some of the broad financial factors and challenges that currently impact the missions of academic medical centers, including Stanford. I will review a portion of this discussion with you in this Newsletter. I would strongly recommend that you read this presentation and become familiar with the issues being discussed.

Although their balance varies, medical schools have four major missions: education, research, clinical care and community service. These discrete missions are unified under the general umbrella of an "Academic Medical Center" (AMC) and their interrelations can vary from school to school. There are 125 medical schools in the USA that are associated with both private and public universities. Some, such as Stanford, are "research intensive", whereas others have a greater emphasis on clinical training or community service. Except for the Uniformed Services University for the Health Sciences in Bethesda, Maryland, which receives support through the federal government, the public schools are affiliated with state universities and receive various degrees of support from that association (e.g., UCSF is such an example).

Of course Stanford University School of Medicine is part of an extraordinary private university, but even within the University, it also has some unique features. Along with the School of Business, the School of Medicine is a "formula" school at Stanford and as such is responsible for its overall financial performance. Accordingly, it does not receive general operating dollars from the University per se, and maintains its own reserves and endowment to help support its mission. There are, however, a number of important financial, administrative and academic relationships that flow back-and-forth between the University and the School of Medicine. Overall these provide strength and excellence to the entire enterprise.

As do other medical schools, Stanford University School of Medicine and Medical Center supports four major missions: education, research, clinical care and community service. Although each of these four missions have different sources of funding, and different expenses they must bear, there are many interrelations among them. In many ways, the missions are inextricably linked and even interdependent. At Stanford, the emphasis on research, and the excellence of its students, faculty and programs, makes it one of the very best schools in the nation.

To better understand the financial challenges facing AMC's in general and Stanford specifically, I have listed below the general sources available to support key missions.

EDUCATION: Student Tuition Faculty/Staff Compensation
  Gifts Financial Aid
  Endowment Earnings Facilities Operations and Maintenance
  Earnings on Reserves Academic Support Services
  Patent Income General Administration
  Dean's Tax  
RESEARCH: Direct Research Funding Faculty/Staff Direct Research Compensation
  Indirect Cost Recovery Facilities Operations and Maintenance
  Gifts Academic Support Services
  Endowment Earnings General Administration
  Earnings on Reserves Unfunded Faculty Research Time
  Patent Income Indirect Cost Recovery (Formula)
  Dean's Tax  
PATIENT CARE: Professional Services Income Faculty Physician Compensation
  Gifts Facilities Operations and Maintenance
  Endowment Earnings Clinical Staff Compensation
  Earnings on Reserves Practice Expense
  Patent Income Hospital Allocated Costs
  Dean's Tax  
  Clinical Program Development  
  Clinical Service Payments  

What do some of these terms mean and how do they relate to the School's current financial landscape? Sources or Revenues

Uses or Expenses

The challenge facing AMCs, including Stanford University School of Medicine, is that the costs for education and research cannot be met by the tuition or research dollars alone and thus other sources are needed. For example, tuition payments cover only approximately a third of the expenses associated with medical education. Moreover, even though Stanford faculty achieve the highest per capita level of competitive grant support than any other medical school in the nation, there is still a shortfall of 10-20% of research expenses that are not covered from the direct or indirect dollars from research grants. In the past, clinical income was one of the sources used to help support the missions in education and research in academic medical centers. Today, that is increasingly difficult or impossible. Indeed, as you have read repeatedly in the newspapers, the revenue to pay for clinical care, especially in teaching hospitals that care for complicated patients or the uninsured, is not met by current insurance payments. Thus the dilemma and challenge facing academic medical centers today.

The relationships within AMCs vary at different universities and medical schools in the USA. In most American Medical Centers, the education and research programs reside in the medical school. Some medical schools "own" their teaching hospital whereas others have affiliations with hospitals that are independently owned and operated. Some teaching hospitals also have large research operations, including basic and clinical science programs. Certain teaching hospitals are governed by Boards of Directors (i.e., Trustees) that are independent and separate from the medical school or university, whereas others have overlap or even joint governance. Each model has advantages and disadvantages, and the relationships between teaching hospitals and medical schools have evolved and changed during the last decades, influenced largely by the overall mission of the university and school as well as regional and local factors, cultures and, of course, financial support. Quite naturally, the relationships are either enhanced or strained when the funding sources for the interrelated missions are robust or limited.

The organizational interrelationships at Stanford are unique and enormously important for the future success of the School and the optimization of the health of our communities, locally and globally. At Stanford, both the Sanford Hospital and Clinics (SHC) as well as the Lucile Packard Children's Hospital (LPCH) are non-profit public benefit corporations affiliated with Stanford University. SCH and LPCH are led by separate CEOs but share selected administrative functions. Each Hospital is also governed separately by a Board of Directors, although there is overlap in composition.

The primary purpose of SHC and LPCH is to "support, benefit and further the educational, scientific and charitable purposes of the Stanford University School of Medicine". Accordingly, SHC and LPCH are intimately and integrally related to the missions of the School of Medicine: the education and training of future physicians, and the acquisition of new knowledge through basic and clinical research that ultimately benefits the health of adults and children through high-quality and cost-effective health care services. These important affiliations, shared missions, and joint governance help assure that the discoveries which emerge from our research programs, now and in the future, will be available to patients cared for at SCH and LPCH. That will help assure that our community within Stanford, and its surrounding regions, benefit from excellent care and new discoveries.

However, these important relationships are clearly challenged in the current fiscal environment. Since education and research require supplemental support to sustain their excellence, new approaches must be found to help pay for these essential missions. This is also true for clinical programs that are not adequately and appropriately compensated in the current healthcare marketplace. However, because of the overlapping and intertwined flow of funds between the Hospitals and the School as well as with the University, shortfalls in one area create challenges in another. For example, as the current SHC operating budget has been in deficit, largely because of inadequate payments from HMOs and the government for clinical services, a reduction in payments from the Hospital to the clinical faculty for professional services has occurred. When that happens, it creates a challenge for the clinical departments and for the School to help make up these deficits. While such changes in funding create tensions and even divisiveness, they compel us to focus on our primary missions and to find ways to work creatively to assure they are sustained.

This will require making choices. Choices in the nature and scope of our educational programs, in the focus and size of our investments in research, and in the scope and depth of the clinical programs that are provided. I outlined some of the areas of strategic focus and investment I think are important for the School of Medicine in my initial Newsletter (April 2, 2001) that is available on the Medical Center Homepage.

Choices are also necessary in our clinical programs, focusing on those we can do uniquely and well, and in a manner that complements those services offered by other providers in our community. At this juncture, the primary areas of focus for both the adult and pediatric clinical programs will be in Cardiovascular Diseases, Cancer, Brain and Behavior and Surgical Specialties. Wherever possible, these clinical centers of excellence will be enhanced by basic and clinical research agendas. Naturally this means that some other important areas of medicine will be de-emphasized at Sanford, largely because they can be offered by other providers or because they are not as prime for new development and innovation. This also means that we will need to work closely with our colleagues at the VA Hospital, Santa Clara Valley Medical Center and with other community partners to develop an integrated and more embracing academic medical center.

During this period of transition, however, one thing is absolutely clear. We must sustain the integrity and relationships between our Hospitals & Clinics, our School of Medicine and our University. This will require sacrifice and commitment by all. It will require rigorous management of hospital and school operations and resources. It will require accommodation to reductions in services that have been previously valued. It will require even more careful investments in program development, recruitment and capital expansion. It will require us to think rigorously about every decision that requires school or hospital resources and to do so with a Medical Center perspective, as well as that of a student, investigator, clinician or staff member.

The transitions in health care in general, and Stanford specifically, will also require time, patience and a community that is both deliberate, unified and committed. Although the financial challenges at SHC are significant and have an impact across the School and University, it is important that we stand with and behind our Hospitals. The problems they have encountered, especially at SHC, following the merger and de-merger, and in this difficult health care market, can and will be overcome. I am pleased that both our clinical and basic science faculty leaders have pledged their support to work on behalf of the Medical Center through this difficult period. I am pleased that our University leadership and Board of Trustees remain supportive. We have no choice but to work together to assure that future generations will benefit from the success of Stanford University School of Medicine and Medical Center.

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Clinical Investigation Task Force

On Tuesday May 15th, Dr. Charles Prober, Professor of Pediatrics, chaired the first in a series of meetings for a Task Force I appointed to evaluate the resources and infrastructure needed to make clinical investigation as strong and successful at Stanford as possible. Patient-oriented clinical research (which includes translational investigation and clinical trials as well as behavioral, epidemiological and health sciences research) requires institutional resources and commitment to optimize its success. Given the extraordinary opportunities now emerging in the immediate post-genomic era as well as those emanating from medical devices, information technology, and other clinical research venues, it is important for Stanford to seize these opportunities and become a pacesetter in clinical research.

Accordingly, Dr. Prober assembled nearly 50 individuals who expressed an interest in optimizing clinical research at Stanford and offered their insights and suggestions. The participating individuals came from the basic and clinical science faculty as well as from nursing and research administration. It is important to take note of the number of individuals who expressed an interest in clinical research and the various disciplines they came from.

In this first meeting, Dr. Prober requested that attendees comment on current impediments to conducting clinical research at Stanford along with suggestions for how to improve the opportunities. There were a number of important suggestions as well as considerable overlap in some of the areas of concern. Thankfully, many of the impediments (e.g., contracting delays, IRB reviews) that were raised are potentially solvable although resource utilization will need to be considered carefully.

Dr. Prober plans to meet biweekly and to have a report available within the next 2-3 months. If you have any suggestions to offer regarding clinical research at Stanford, please contact Dr. Charles Prober at CProber@stanford.edu.

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Noteworthy Events

During the past weeks there were several celebrations commemorating success in important missions and accomplishments. Following are some highlights:

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Dr. Michael Levitt, Professor and Chair, Department of Structural Biology, was elected a Fellow in the Royal Society. The Royal Society was founded in 1660 to promote the natural and applied sciences and by election honors individuals who have made exceptional contributions. Professor Levitt's work on protein folding and computational analysis of structure is renowned and important. Please join me in congratulating Dr. Levitt.

Dr. Roeland Nusse, Professor and Chair of the Department of Developmental Biology has been elected to the American Academy of Arts and Sciences for his seminal work on the role of Wnt signaling in both development and cancer. Well deserved congratulations to Dr. Nusse.

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Appointments and Promotions

Please extend your congratulations to each of these faculty members.

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A downloadable Microsoft Word version of the newsletter is available. If clicking on this following link does not initiate a download, right-click (Windows) or click-and-hold (Mac), then use the command most similar to "Download Link To Disk" or "Save This Link As" and save the Word file to your disk.

Microsoft Word version: DeanNews05-29-01.doc

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